Palestine still waiting for suitors

September 30, 2013

EAST PALESTINE - Untapped oil and gas underground in East Palestine may have potential but nothing is certain until a lease is signed, and for now it's a waiting game.

The village began considering leasing municipal land for oil and gas exploration about two years ago, the same time other municipalities showed an interest in the industry.

There is about 140 acres of park land East Palestine is willing to lease, and a portion of the cemetery has been discussed.

Council is mostly considering a non-surface lease, meaning a drill unit would not be located in village limits and oil and gas would be reached through horizontal means underneath the surface.

Council approved working with Salem-based Buckeye Mineral Development LLC in August of last year. The for-profit company owned by Bob Rea negotiates leasing terms on the land-owners' behalf with major oil and gas exploration companies for a fee percentage on the signing bonus.

The village agreed to have Buckeye negotiate on its behalf.

At one point Rea told council the village could reap at least $5,000 an acre and 18 percent royalty on any oil and gas recovered from leased property.

In February of this year, after the agreement had already expired, he approached council to say a formal lease was not offered because the village was behind the curve.

He said had East Palestine been represented by his company earlier last year it would have been included in a group of more than 1,100 acres leased to Chesapeake Energy. He said the companies aren't interested in leasing a small amount of land in the county and that Chesapeake already held the "lion's share."

Six months later the village remains without a lease offer and Village Manager Pete Monteleone said several phone calls to Buckeye have not been returned.

A message left for Rea at Buckeye Mineral by the Morning Journal Thursday and Friday was not returned. A receptionist said he wasn't immediately available due to being in a meeting.

Monteleone did not wish to comment further on the matter, only stating the village's next step is council's decision.

Councilman Alan Cohen said it is time to move on from Buckeye and pursue leasing through someone else.

"I think that we should probably start exploring other options. I didn't have a whole lot of confidence in Bob Rea but I was willing to wait to see how it plays out. It's been over a year now. He won't return our phone calls," he said.

He went on to say when they began working with Buckeye he and other members of council believed a lease would be offered soon, earning $5,000 to $6,000 per acre.

"Obviously something didn't go as planned," he said.

That he was disappointed with Buckeye was made known to this reporter after the February meeting with Rea, although he did not wish to go on record at that time.

Cohen agreed his concerns could be shared with Rea on the basis they remain anonymous.

When contacted then, Rea did not wish to comment.

"Everybody was under the impression Bob Rea was going to produce something quickly. I don't think anybody expected him to be a miracle worker, but I don't think they expected it to be over a year later and have nothing to show for it," Cohen said.

He added he believes "it's late in the game" now and isn't optimistic a lucrative lease will be put on the table anytime soon.

Councilman Fran Figley believes it isn't too late.

"Everything I've looked into or continued to look into with oil and gas is it's going to happen in its proper time ... Whatever we do I don't think it's a loss, I think it's going to happen," he said.

He believes companies will have to sign the local land eventually, as other parcels are being picked up nearby.

If the rest of council wants to pursue leasing another way that's fine with him, he added, but he doesn't think they should sign for less than $5,000.

"I'm not in a big hurry unless we get $7,000 an acre," he said.

Revenue from a lease should be given back to the citizens, he added.

"I think we are a bedroom community and I don't think there is anything wrong with it. If we have people in town that dress their place up, we'll get our lots sold (and) bring in more taxes," he said.

Councilman Don Elzer also believes leasing will gain steam.

"Our weird thing is we have a lot of property but it's not contiguous. I think we missed the boat the first time around. I don't think it's the end of the world. I think we'll be OK," he said.

As far as drilling versus non-drilling leases, he thinks the village could benefit from a drill lease as long as the drill is located on the outskirts of town.

"If there is a place where everyone can agree, I'm fine with that," he said.

Councilwoman Endia Wisser said she doesn't understand why a lease hasn't been offered yet, but wants the village to continue pursuing one.

Councilwoman Ellen Beagle did not return a phone call and attempts to reach Councilman James Tyger were not successful.